UNDERWRITING AGREEMENT
between
ARGYLE SECURITY ACQUISITION CORPORATION
and
XXXXXX & XXXXXXX, LLC
Dated: _____________, 2005
ARGYLE SECURITY ACQUISITION CORPORATION
UNDERWRITING AGREEMENT
_______________, 2005
XXXXXX & XXXXXXX, LLC
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Dear Sirs:
The undersigned, ARGYLE SECURITY ACQUISITION CORPORATION, a Delaware corporation
("Company"), hereby confirms its agreement with XXXXXX & XXXXXXX, LLC (being
referred to herein variously as "you," "Xxxxxx" or the "Underwriter") as
follows:
1. Purchase and Sale of Securities.
1.1. Firm Securities.
1.1.1. Purchase of Firm Units. On the basis of the representations
and warranties herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to issue and sell, to the Underwriter, an
aggregate of 12,500,000 units ("Firm Units") of the Company at a purchase price
(net of discounts and commissions) of $7.52 per Firm Unit. The Firm Units are to
be offered initially to the public ("Offering") at the offering price of $8.00
per Firm Unit. Each Firm Unit consists of one share of the Company's common
stock, par value $.0001 per share ("Common Stock"), and one warrant
("Warrants"). The shares of Common Stock and the Warrants included in the Firm
Units will not be separately transferable until __ days after the effective date
("Effective Date") of the Registration Statement (as defined in Section 2.1.1
hereof) unless Xxxxxx informs the Company of its decision to allow earlier
separate trading, but in no event xxxx Xxxxxx allow separate trading until the
preparation of an audited balance sheet of the Company reflecting receipt by the
Company of the proceeds of the Offering and the filing of a Form 8-K by the
Company which includes such balance sheet. Each Warrant entitles its holder to
exercise it to purchase one share of Common Stock for $6.00 during the period
commencing on the later of the consummation by the Company of its "Business
Combination" or one year from the Effective Date of the Registration Statement
and terminating on the five-year anniversary of the Effective Date. "Business
Combination" shall mean any merger, capital stock exchange, asset or stock
acquisition or other similar business combination consummated by the Company
with an operating business (as described more fully in the Registration
Statement).
1.1.2. Payment and Delivery. Delivery and payment for the Firm Units
shall be made at 10:00 A.M., New York time, on the third business day following
the Effective Date (or the fourth business day following the Effective Date, if
the Registration Statement is declared effective after 4:30 p.m.) or at such
earlier time as shall be agreed upon by Xxxxxx and the Company at the offices of
Xxxxxx or at such other place as shall be agreed upon by Xxxxxx and the Company.
The hour and date of delivery and payment for the Firm Units are called "Closing
Date." Payment for the Firm Units shall be made on the Closing Date at the
Underwriter's election by wire transfer in Federal (same day) funds or by
certified or bank cashier's check(s) in New York Clearing House funds, payable
as follows: $_______ of the proceeds received by the Company for the Firm Units
shall be deposited in the trust fund established by the Company for the benefit
of the public stockholders as described in the Registration Statement ("Trust
Fund") pursuant to the terms of an Investment Management Trust Agreement ("Trust
Agreement") and the remaining proceeds shall be paid to the order of the Company
upon delivery to you (or through the facilities of the Depository Trust Company
("DTC") of certificates (in form and substance satisfactory to the Underwriter)
representing the Firm Units) for the account of the Underwriter. The Firm Units
shall be registered in such name or names and in such authorized denominations
as Xxxxxx may request in writing at least two full business days prior to the
Closing Date. The Company will permit Xxxxxx to examine and package the Firm
Units for delivery, at least one full business day prior to the Closing Date.
The Company shall not be obligated to sell or deliver any of the Firm Units
except upon tender of payment by Xxxxxx for all the Firm Units.
1.2. Over-Allotment Option.
1.2.1. Option Units. For the purposes of covering any
over-allotments in connection with the distribution and sale of the Firm Units,
the Underwriter is hereby granted, severally and not jointly, an option to
purchase up to an additional 1,875,000 units from the Company ("Over-allotment
Option"). Such additional 1,875,000 units are hereinafter referred to as "Option
Units." The Firm Units and the Option Units are hereinafter collectively
referred to as the "Units," and the Units, the shares of Common Stock and the
Warrants included in the Units and the shares of Common Stock issuable upon
exercise of the Warrants are hereinafter referred to collectively as the "Public
Securities." The purchase price to be paid for the Option Units will be the same
price per Option Unit as the price per Firm Unit set forth in Section 1.1.1
hereof.
1.2.2. Exercise of Option. The Over-allotment Option granted
pursuant to Section 1.2.1 hereof may be exercised by Xxxxxx as to all (at any
time) or any part (from time to time) of the Option Units within 45 days after
the Effective Date. The Underwriter will not be under any obligation to purchase
any Option Units prior to the exercise of the Over-allotment Option. The
Over-allotment Option granted hereby may be exercised by the giving of oral
notice to the Company by Xxxxxx, which must be confirmed in writing by overnight
mail or facsimile transmission setting forth the number of Option Units to be
purchased and the date and time for delivery of and payment for the Option
Units, which will not be later than five full business days after the date of
the notice or such other time as shall be agreed upon by the Company and Xxxxxx,
at the offices of Xxxxxx or at such other place as shall be agreed upon by the
Company and Xxxxxx. If such delivery and payment for the Option Units does not
occur on the Closing Date, the date and time of the Closing for such Option
Units will be as set forth on the notice (hereinafter the "Option Closing
Date"). Upon exercise of the Over-allotment Option, the Company will become
obligated to convey to the Underwriter, and, subject to the terms and conditions
set forth herein, the Underwriter will become obligated to purchase, the number
of Option Units specified in such notice.
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1.2.3. Payment and Delivery. Payment for the Option Units shall be
made on the Option Closing Date at the Underwriter's election by wire transfer
in Federal (same day) funds or by certified or bank cashier's check(s) in New
York Clearing House funds, payable as follows: $7.52 per Option Unit shall be
deposited in the Trust Fund pursuant to the Trust Agreement and the remaining
proceeds shall be paid to the order of the Company upon delivery to you (or
through the facilities of DTC) of certificates (in form and substance
satisfactory to the Underwriter) representing the Option Units for the account
of the Underwriter. The certificates representing the Option Units to be
delivered will be in such denominations and registered in such names as Xxxxxx
requests not less than two full business days prior to the Closing Date or the
Option Closing Date, as the case may be, and will be made available to Xxxxxx
for inspection, checking and packaging at the aforesaid office of the Company's
transfer agent or correspondent not less than one full business day prior to
such Closing Date.
1.3. Underwriter's Purchase Option.
1.3.1. Purchase Option. The Company hereby agrees to issue and sell
to Xxxxxx (and/or their designees) on the Effective Date an option
("Underwriter's Purchase Option") for the purchase of an aggregate of 625,000
units ("Underwriter's Units") for an aggregate purchase price of $100.00. The
Underwriter's Purchase Option shall be exercisable, in whole or in part,
commencing on the later of the consummation of a Business Combination or one
year from the Effective Date and expiring on the five-year anniversary of the
Effective Date at an initial exercise price per Underwriter's Unit of $8.80,
which is equal to one hundred and ten percent (110%) of the initial public
offering price of a Unit. The Underwriter's Purchase Option, the Underwriter's
Units, the Warrants included in Underwriter's Units (the "Underwriter's
Warrants") and the shares of Common Stock issuable upon exercise of the
Underwriter's Warrants are hereinafter referred to collectively as the
"Underwriter's Securities." The Public Securities and the Underwriter's
Securities are hereinafter referred to collectively as the "Securities." Xxxxxx
understands and agrees that there are significant restrictions against
transferring the Underwriter's Purchase Option during the first year after the
Effective Date, as set forth in Section 3 of the Underwriter's Purchase Option.
1.3.2. Delivery and Payment. Delivery and payment for the
Underwriter's Purchase Option shall be made on the Closing Date. The Company
shall deliver to the Underwriter, upon payment therefor, certificates for the
Underwriter's Purchase Option in the name or names and in such authorized
denominations as the Underwriter may request.
2. Representations and Warranties of the Company. The Company represents and
warrants to the Underwriter as follows:
2.1. Filing of Registration Statement.
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2.1.1. Pursuant to the Act. The Company has filed with the
Securities and Exchange Commission ("Commission") a registration statement and
an amendment or amendments thereto, on Form S-1 (File No. 333-___), including
any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Public Securities under the Securities Act of 1933, as
amended ("Act"), which registration statement and amendment or amendments have
been prepared by the Company in conformity with the requirements of the Act, and
the rules and regulations ("Regulations") of the Commission under the Act.
Except as the context may otherwise require, such registration statement, as
amended, on file with the Commission at the time the registration statement
becomes effective (including the prospectus, financial statements, schedules,
exhibits and all other documents filed as a part thereof or incorporated therein
and all information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430A of the Regulations), is hereinafter called the
"Registration Statement," and the form of the final prospectus dated the
Effective Date included in the Registration Statement (or, if applicable, the
form of final prospectus filed with the Commission pursuant to Rule 424 of the
Regulations), is hereinafter called the "Prospectus." The Registration Statement
has been declared effective by the Commission on the date hereof.
2.1.2. Pursuant to the Exchange Act. The Company has filed with the
Commission a Form 8-A (File Number 000-______) providing for the registration
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), of the
Units, the Common Stock and the Warrants. The registration of the Units, Common
Stock and Warrants under the Exchange Act has been declared effective by the
Commission on the date hereof.
2.2. No Stop Orders, Etc. Neither the Commission nor, to the best of the
Company's knowledge, any state regulatory authority has issued any order or
threatened to issue any order preventing or suspending the use of any
Preliminary Prospectus or has instituted or, to the best of the Company's
knowledge, threatened to institute any proceedings with respect to such an
order.
2.3. Disclosures in Registration Statement.
2.3.1. 10b-5 Representation. At the time the Registration Statement
became effective and at all times subsequent thereto up to the Closing Date and
the Option Closing Date, if any, the Registration Statement and the Prospectus
will contain all material statements that are required to be stated therein in
accordance with the Act and the Regulations, and will in all material respects
conform to the requirements of the Act and the Regulations and neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, on such dates, will contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. When any Preliminary Prospectus was first filed with the
Commission (whether filed as part of the Registration Statement for the
registration of the Securities or any amendment thereto or pursuant to Rule
424(a) of the Regulations) and when any amendment thereof or supplement thereto
was first filed with the Commission, such Preliminary Prospectus and any
amendments thereof and supplements thereto complied or will have been corrected
in the Prospectus to comply in all material respects with the applicable
provisions of the Act and the Regulations and did not and will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
representation and warranty made in this Section 2.3.1 does not apply to
statements made or statements omitted in reliance upon and in conformity with
written information furnished to the Company with respect to the Underwriter by
Xxxxxx expressly for use in the Registration Statement or Prospectus or any
amendment thereof or supplement thereto.
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2.3.2. Disclosure of Agreements. The agreements and documents
described in the Registration Statement and the Prospectus conform to the
descriptions thereof contained therein and there are no agreements or other
documents required to be described in the Registration Statement or the
Prospectus or to be filed with the Commission as exhibits to the Registration
Statement, that have not been so described or filed. Each agreement or other
instrument (however characterized or described) to which the Company is a party
or by which its property or business is or may be bound or affected and (i) that
is referred to in the Prospectus, or (ii) is material to the Company's business,
has been duly and validly executed by the Company, is in full force and effect
and is enforceable against the Company and, to the Company's knowledge, the
other parties thereto, in accordance with its terms, except (x) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (y) as enforceability of any
indemnification or contribution provision may be limited under the federal and
state securities laws, and (z) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought, and none of such agreements or instruments has been assigned by
the Company, and neither the Company nor, to the best of the Company's
knowledge, any other party is in breach or default thereunder and, to the best
of the Company's knowledge, no event has occurred that, with the lapse of time
or the giving of notice, or both, would constitute a breach or default
thereunder. To the best of the Company's knowledge, performance by the Company
of the material provisions of such agreements or instruments will not result in
a violation of any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its assets or businesses, including,
without limitation, those relating to environmental laws and regulations.
2.3.3. Prior Securities Transactions. No securities of the Company
have been sold by the Company or by or on behalf of, or for the benefit of, any
person or persons controlling, controlled by, or under common control with the
Company within the three years prior to the date hereof, except as disclosed in
the Registration Statement.
2.3.4. Regulations. The disclosures in the Registration Statement
concerning the effects of Federal, State and local regulation on the Company's
business purpose as currently contemplated are correct in all material respects
and do not omit to state a material fact necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading.
2.4. Changes After Dates in Registration Statement.
2.4.1. No Material Adverse Change. Since the respective dates as of
which information is given in the Registration Statement and the Prospectus,
except as otherwise specifically stated therein, (i) there has been no material
adverse change in the condition, financial or otherwise, or business prospects
of the Company, (ii) there have been no material transactions entered into by
the Company, other than as contemplated pursuant to this Agreement, and (iii) no
member of the Company's management has resigned from any position with the
Company.
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2.4.2. Recent Securities Transactions, etc. Subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, and except as may otherwise be indicated or contemplated
herein or therein, the Company has not (i) issued any securities or incurred any
material liability or obligation, direct or contingent, for borrowed money; or
(ii) declared or paid any dividend or made any other distribution on or in
respect to its capital stock.
2.5. Independent Accountants. Xxxxxxxxx Xxxxx Xxxxxxx LLP ("GGK"), whose
report is filed with the Commission as part of the Registration Statement, are
independent accountants as required by the Act and the Regulations. GGK has not,
during the periods covered by the financial statements included in the
Prospectus, provided to the Company any non-audit services, as such term is used
in Section 10A(g) of the Exchange Act.
2.6. Financial Statements. The financial statements, including the notes
thereto and supporting schedules included in the Registration Statement and
Prospectus fairly present the financial position, the results of operations and
the cash flows of the Company at the dates and for the periods to which they
apply; and such financial statements have been prepared in conformity with
generally accepted accounting principles, consistently applied throughout the
periods involved; and the supporting schedules included in the Registration
Statement present fairly the information required to be stated therein. The
Registration Statement discloses all material off-balance sheet transactions,
arrangements, obligations (including contingent obligations), and other
relationships of the Company with unconsolidated entities or other persons that
may have a material current or future effect on the Company's financial
condition, changes in financial condition, results of operations, liquidity,
capital expenditures, capital resources, or significant components of revenues
or expenses.
2.7. Authorized Capital; Options; Etc. The Company had at the date or
dates indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus.
Based on the assumptions stated in the Registration Statement and the
Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in, or contemplated by,
the Registration Statement and the Prospectus, on the Effective Date and on the
Closing Date, there will be no options, warrants, or other rights to purchase or
otherwise acquire any authorized but unissued shares of Common Stock of the
Company or any security convertible into shares of Common Stock of the Company,
or any contracts or commitments to issue or sell shares of Common Stock or any
such options, warrants, rights or convertible securities.
2.8. Valid Issuance of Securities; Etc.
2.8.1. Outstanding Securities. All issued and outstanding securities
of the Company have been duly authorized and validly issued and are fully paid
and non-assessable; the holders thereof have no rights of rescission with
respect thereto, and are not subject to personal liability by reason of being
such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The authorized Common Stock conforms
in all material respects to all statements relating thereto contained in the
Registration Statement and the Prospectus. The offers and sales of the
outstanding Common Stock were at all relevant times either registered under the
Act and the applicable state securities or Blue Sky laws or, based in part on
the representations and warranties of the purchasers of such shares of Common
Stock, exempt from such registration requirements.
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2.8.2. Securities Sold Pursuant to this Agreement. The Securities
have been duly authorized and, when issued and paid for, will be validly issued,
fully paid and non-assessable; the holders thereof are not and will not be
subject to personal liability by reason of being such holders; the Securities
are not and will not be subject to the preemptive rights of any holders of any
security of the Company or similar contractual rights granted by the Company;
and all corporate action required to be taken for the authorization, issuance
and sale of the Securities has been duly and validly taken. The Securities
conform in all material respects to all statements with respect thereto
contained in the Registration Statement. When issued, the Underwriter's Purchase
Option, the Underwriter's Warrant, and the Warrants will constitute valid and
binding obligations of the Company to issue and sell, upon exercise thereof and
payment of the respective exercise prices therefor, the number and type of
securities of the Company called for thereby in accordance with the terms
thereof and such Underwriter's Purchase Option, the Underwriter's Warrants, and
Warrants are enforceable against the Company in accordance with their respective
terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (ii) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws; and (iii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
2.9. Registration Rights of Third Parties. Except as set forth in the
Prospectus, no holders of any securities of the Company or any rights
exercisable for or convertible or exchangeable into securities of the Company
have the right to require the Company to register any such securities of the
Company under the Act or to include any such securities in a registration
statement to be filed by the Company.
2.10. Validity and Binding Effect of Agreements. This Agreement, the
Warrant Agreement (as defined in Section 2.20 hereof), the Trust Agreement, the
Services Agreement (as defined in Section 3.7.2 hereof) and the Escrow Agreement
(as defined in Section 2.21.2 hereof) have been duly and validly authorized by
the Company and constitute, and the Underwriter's Purchase Option, has been duly
and validly authorized by the Company and, when executed and delivered, will
constitute, the valid and binding agreements of the Company, enforceable against
the Company in accordance with their respective terms, except: (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally; (ii) as enforceability of
any indemnification or contribution provision may be limited under the federal
and state securities laws; and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
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2.11. No Conflicts, Etc. The execution, delivery, and performance by the
Company of this Agreement, the Underwriter's Purchase Option, the Warrant
Agreement, the Trust Agreement, the Services Agreement and the Escrow Agreement,
the consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms hereof and thereof
do not and will not, with or without the giving of notice or the lapse of time
or both: (i) result in a breach of, or conflict with any of the terms and
provisions of, or constitute a default under, or result in the creation,
modification, termination or imposition of any lien, charge or encumbrance upon
any property or assets of the Company pursuant to the terms of any agreement or
instrument to which the Company is a party except pursuant to the Trust
Agreement referred to in Section 2.22 hereof; (ii) result in any violation of
the provisions of the Certificate of Incorporation or the Bylaws of the Company;
or (iii) violate any existing applicable law, rule, regulation, judgment, order
or decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or business.
2.12. No Defaults; Violations. No material default exists in the due
performance and observance of any term, covenant or condition of any material
license, contract, indenture, mortgage, deed of trust, note, loan or credit
agreement, or any other agreement or instrument evidencing an obligation for
borrowed money, or any other material agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of the
properties or assets of the Company is subject. The Company is not in violation
of any term or provision of its Certificate of Incorporation or Bylaws or in
violation of any material franchise, license, permit, applicable law, rule,
regulation, judgment or decree of any governmental agency or court, domestic or
foreign, having jurisdiction over the Company or any of its properties or
businesses.
2.13. Corporate Power; Licenses; Consents.
2.13.1. Conduct of Business. The Company has all requisite corporate
power and authority, and has all necessary authorizations, approvals, orders,
licenses, certificates and permits of and from all governmental regulatory
officials and bodies that it needs as of the date hereof to conduct its business
purpose as described in the Prospectus. The disclosures in the Registration
Statement concerning the effects of federal, state and local regulation on this
offering and the Company's business purpose as currently contemplated are
correct in all material respects and do not omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
2.13.2. Transactions Contemplated Herein. The Company has all
requisite corporate power and authority to enter into this Agreement and to
carry out the provisions and conditions hereof, and all consents,
authorizations, approvals and orders required in connection therewith have been
obtained. No consent, authorization or order of, and no filing with, any court,
government agency or other body is required for the valid issuance, sale and
delivery, of the Securities and the consummation of the transactions and
agreements contemplated by this Agreement, the Warrant Agreement, the
Underwriter's Purchase Option, the Trust Agreement, the Services Agreement and
the Escrow Agreement and as contemplated by the Prospectus, except with respect
to applicable federal and state securities laws.
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2.14. D&O Questionnaires. To the best of the Company's knowledge, all
information contained in the questionnaires ("Questionnaires") completed by each
of the Company's stockholders immediately prior to the Offering ("Initial
Stockholders") and provided to the Underwriter as an exhibit to his or her
Insider Letter (as defined in Section 2.21.1) is true and correct and the
Company has not become aware of any information which would cause the
information disclosed in the questionnaires completed by each Initial
Stockholder to become inaccurate and incorrect.
2.15. Litigation; Governmental Proceedings. There is no action, suit,
proceeding, inquiry, arbitration, investigation, litigation or governmental
proceeding pending or, to the best of the Company's knowledge, threatened
against, or involving the Company or, to the best of the Company's knowledge,
any Initial Stockholder which has not been disclosed in the Registration
Statement or the Questionnaires.
2.16. Good Standing. The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of its state of
incorporation and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of business requires such qualification, except where
the failure to qualify would not have a material adverse effect on the Company.
2.17. Transactions Affecting Disclosure to NASD.
2.17.1. Finder's Fees. Except as described in the Prospectus, there
are no claims, payments, arrangements, agreements or understandings relating to
the payment of a finder's, consulting or origination fee by the Company or any
Initial Stockholder with respect to the sale of the Securities hereunder or any
other arrangements, agreements or understandings of the Company or, to the best
of the Company's knowledge, any Initial Stockholder that may affect the
Underwriter's compensation, as determined by the National Association of
Securities Dealers, Inc. ("NASD").
2.17.2. Payments Within Twelve Months. The Company has not made any
direct or indirect payments (in cash, securities or otherwise): (i) to any
person, as a finder's fee, consulting fee or otherwise, in consideration of such
person raising capital for the Company or introducing to the Company persons who
raised or provided capital to the Company; (ii) to any NASD member; or (iii) to
any person or entity that has any direct or indirect affiliation or association
with any NASD member, within the twelve months prior to the Effective Date,
other than payments to Xxxxxx.
2.17.3. Use of Proceeds. None of the net proceeds of the Offering
will be paid by the Company to any participating NASD member or its affiliates,
except as specifically authorized herein and except as may be paid in connection
with a Business Combination as contemplated by the Prospectus.
2.17.4. Insiders' NASD Affiliation. Based on questionnaires
distributed to such persons, no officer, director or any beneficial owner of the
Company's unregistered securities has any direct or indirect affiliation or
association with any NASD member. The Company will advise Xxxxxx and its counsel
if it learns that any officer, director or owner of at least 5% of the Company's
outstanding shares of Common Stock is or becomes an affiliate or associated
person of an NASD member participating in the offering.
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2.18. Foreign Corrupt Practices Act. Neither the Company nor any of the
Initial Stockholders or any other person acting on behalf of the Company has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency or instrumentality
of any government (domestic or foreign) or any political party or candidate for
office (domestic or foreign) or any political party or candidate for office
(domestic or foreign) or other person who was, is, or may be in a position to
help or hinder the business of the Company (or assist it in connection with any
actual or proposed transaction) that (i) might subject the Company to any damage
or penalty in any civil, criminal or governmental litigation or proceeding, (ii)
if not given in the past, might have had a material adverse effect on the
assets, business or operations of the Company as reflected in any of the
financial statements contained in the Prospectus or (iii) if not continued in
the future, might adversely affect the assets, business, operations or prospects
of the Company. The Company's internal accounting controls and procedures are
sufficient to cause the Company to comply with the Foreign Corrupt Practices Act
of 1977, as amended.
2.19. Officers' Certificate. Any certificate signed by any duly authorized
officer of the Company, in connection with the Offering, and delivered to you or
to your counsel shall be deemed a representation and warranty by the Company to
the Underwriter as to the matters covered thereby.
2.20. Warrant Agreement. The Company has entered into a warrant agreement
with respect to the Warrants and the Underwriter's Warrants with American Stock
Transfer & Trust Company substantially in the form filed as an exhibit to the
Registration Statement ("Warrant Agreement"), providing for, among other things,
the payment of a warrant solicitation fee as contemplated by Section 3.9 hereof.
2.21. Agreements With Initial Stockholders.
2.21.1. Letters. The Company has caused to be duly executed legally
binding and enforceable agreements (except (i) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (ii) as enforceability of any indemnification,
contribution or noncompete provision may be limited under the federal and state
securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought) a form of which is annexed as Exhibit 10.1 to the Registration
Statement ("Insider Letter"), pursuant to which each of the Initial Stockholders
of the Company agree to certain matters, including but not limited to, certain
matters described as being agreed to by them under the "Proposed Business"
Section of the Prospectus.
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2.21.2. Escrow Agreement. The Company has caused the Initial
Stockholders to enter into an escrow agreement ("Escrow Agreement") with
American Stock Transfer & Trust Company ("Escrow Agent"), substantially in the
form annexed as Exhibit 10.8 to the Registration Statement, whereby the Common
Stock owned by each of the Initial Stockholders will be held in escrow by the
Escrow Agent, until the third anniversary of the Effective Date. During such
escrow period, the Initial Stockholders shall be prohibited from selling or
otherwise transferring such shares (except to spouses and children of Initial
Stockholders and trusts established for their benefit and as otherwise set forth
in the Escrow Agreement), but will retain the right to vote such shares and
receive any distributions with respect to such shares. To the Company's
knowledge, the Escrow Agreement is enforceable against each of the Initial
Stockholders and will not, with or without the giving of notice or the lapse of
time or both, result in a breach of, or conflict with any of the terms and
provisions of, or constitute a default under, any agreement or instrument to
which any of the Initial Stockholders is a party. The Escrow Agreement shall not
be amended, modified or otherwise changed without the prior written consent of
Xxxxxx.
2.22. Investment Management Trust Agreement. The Company has entered into
the Trust Agreement with respect to certain proceeds of the Offering
substantially in the form annexed as Exhibit 10.7 to the Registration Statement.
2.23. Covenants Not to Compete. No Initial Stockholder, employee, officer
or director of the Company is subject to any noncompetition agreement or
non-solicitation agreement with any employer or prior employer which could
materially affect his ability to be an Initial Stockholder, employee, officer
and/or director of the Company.
2.24. Investments. No more than 45% of the "value" (as defined in Section
2(a)(41) of the Investment Company Act of 1940 ("Investment Company Act")) of
the Company's total assets consist of, and no more than 45% of the Company's net
income after taxes is derived from, securities other than "Government
securities" (as defined in Section 2(a)(16) of the Investment Company Act).
2.25. Subsidiaries. The Company does not own an interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business entity.
2.26. Related Party Transactions. There are no business relationships or
related party transactions involving the Company or any other person required to
be described in the Prospectus that have not been described as required.
3. Covenants of the Company. The Company covenants and agrees as follows:
3.1. Amendments to Registration Statement. The Company will deliver to
Xxxxxx, prior to filing, any amendment or supplement to the Registration
Statement or Prospectus proposed to be filed after the Effective Date and not
file any such amendment or supplement to which Xxxxxx shall reasonably object in
writing.
3.2. Federal Securities Laws.
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3.2.1. Compliance. During the time when a Prospectus is required to
be delivered under the Act, the Company will use all reasonable efforts to
comply with all requirements imposed upon it by the Act, the Regulations and the
Exchange Act and by the regulations under the Exchange Act, as from time to time
in force, so far as necessary to permit the continuance of sales of or dealings
in the Public Securities in accordance with the provisions hereof and the
Prospectus. If at any time when a Prospectus relating to the Public Securities
is required to be delivered under the Act, any event shall have occurred as a
result of which, in the opinion of counsel for the Company or counsel for the
Underwriter, the Prospectus, as then amended or supplemented, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or if it is necessary
at any time to amend the Prospectus to comply with the Act, the Company will
notify Xxxxxx promptly and prepare and file with the Commission, subject to
Section 3.1 hereof, an appropriate amendment or supplement in accordance with
Section 10 of the Act.
3.2.2. Filing of Final Prospectus. The Company will file the
Prospectus (in form and substance satisfactory to Xxxxxx) with the Commission
pursuant to the requirements of Rule 424 of the Regulations.
3.2.3. Exchange Act Registration. For a period of five years from
the Effective Date, or until such earlier time upon which the Company is
required to be liquidated or is acquired in a transaction approved by the
requisite number of stockholders, the Company will use its best efforts to
maintain the registration of the Units, Common Stock and Warrants under the
provisions of the Exchange Act and, the Company will not deregister the Units,
Common Stock and Warrants under the Exchange Act without the prior written
consent of Xxxxxx.
3.3. Blue Sky Filing. The Company will endeavor in good faith, in
cooperation with Xxxxxx, at or prior to the time the Registration Statement
becomes effective, to qualify the Public Securities for offering and sale under
the securities laws of such jurisdictions as Xxxxxx may reasonably designate,
provided that no such qualification shall be required in any jurisdiction where,
as a result thereof, the Company would be subject to service of general process
or to taxation as a foreign corporation doing business in such jurisdiction. In
each jurisdiction where such qualification shall be effected, the Company will,
unless Xxxxxx agrees that such action is not at the time necessary or advisable,
use all reasonable efforts to file and make such statements or reports at such
times as are or may be required by the laws of such jurisdiction.
3.4. Delivery to Underwriter of Prospectuses. The Company will deliver to
the Underwriter, without charge, from time to time during the period when the
Prospectus is required to be delivered under the Act or the Exchange Act such
number of copies of each Preliminary Prospectus and the Prospectus as such
Underwriter may reasonably request and, as soon as the Registration Statement or
any amendment or supplement thereto becomes effective, deliver to you two
original executed Registration Statements, including exhibits, and all
post-effective amendments thereto and copies of all exhibits filed therewith or
incorporated therein by reference and all original executed consents of
certified experts.
3.5. Effectiveness and Events Requiring Notice to Xxxxxx. The Company will
use its best efforts to cause the Registration Statement to remain effective and
will notify Xxxxxx immediately and confirm the notice in writing: (i) of the
effectiveness of the Registration Statement and any amendment thereto; (ii) of
the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding for that purpose when the Company becomes aware
of such; (iii) of the issuance by any state securities commission of any
proceedings for the suspension of the qualification of the Public Securities for
offering or sale in any jurisdiction or of the initiation, or the threatening,
of any proceeding for that purpose when the Company becomes aware of such; (iv)
of the mailing and delivery to the Commission for filing of any amendment or
13
supplement to the Registration Statement or Prospectus; (v) of the receipt of
any comments or request for any additional information from the Commission; and
(vi) of the happening of any event during the period described in Section 3.2.3
hereof that, in the judgment of the Company, makes any statement of a material
fact made in the Registration Statement or the Prospectus untrue or that
requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the Commission or
any state securities commission shall enter a stop order or suspend such
qualification at any time, the Company will make every reasonable effort to
obtain promptly the lifting of such order.
3.6. Review of Financial Statements. For a period of five years from the
Effective Date, or until such earlier time upon which the Company is required to
be liquidated, the Company, at its expense, shall cause its regularly engaged
independent certified public accountants to review (but not audit) the Company's
financial statements for each of the first three fiscal quarters prior to the
announcement of quarterly financial information, the filing of the Company's
Form 10-Q quarterly report and the mailing of quarterly financial information to
stockholders.
3.7. Affiliated Transactions.
3.7.1. Business Combinations. The Company will not consummate a
Business Combination with any entity which is affiliated with any Initial
Stockholder unless the Company obtains an opinion from an independent investment
banking firm that the Business Combination is fair to the Company's stockholders
from a financial perspective.
3.7.2. Affiliate Compensation. Except as set forth above in this
Section 3.7, the Company shall not pay any Initial Stockholder or any of their
affiliates any fees or compensation from the Company, for services rendered to
the Company prior to, or in connection with, the consummation of a Business
Combination; provided that the Initial Stockholders shall be entitled to
reimbursement from the Company for their reasonable out-of-pocket expenses
incurred in connection with seeking and consummating a Business Combination.
Notwithstanding the foregoing to the contrary, the Company may pay an Initial
Stockholder or any of its affiliates fees or compensation in connection with
bona fide services to be rendered to the Company that (i) are expressly approved
by a majority of the Company's disinterested directors, (ii) are legitimately
required by the Company and the Company would otherwise contract such services
from a third party, and (iii) all fees and compensation to be paid to any
Initial Stockholder or its affiliates are determined on an arm's length basis
and in good faith and such fees and compensation are customarily charged by
unrelated third party service providers of a similar nature.
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3.8. Secondary Market Trading and Standard & Poor's. The Company will
apply to be included in Standard & Poor's Daily News and Corporation Records
Corporate Descriptions for a period of five years from the consummation of a
Business Combination. Promptly after the consummation of the Offering, the
Company shall take such steps as may be necessary to obtain a secondary market
trading exemption for the Company's securities in the State of California. The
Company shall also take such other action as may be reasonably requested by
Xxxxxx to obtain a secondary market trading exemption in such other states as
may be requested by Xxxxxx.
3.9. Warrant Solicitation Fees. The Company hereby engages Xxxxxx, on a
non-exclusive basis, as its agent for the solicitation of the exercise of the
Warrants. The Company will (i) assist Xxxxxx with respect to such solicitation,
if requested by Xxxxxx, and (ii) at Xxxxxx'x request, provide Xxxxxx, and direct
the Company's transfer and warrant agent to provide to Xxxxxx, at the Company's
cost, lists of the record and, to the extent known, beneficial owners of, the
Warrants. Commencing one year from the Effective Date, the Company will pay
Xxxxxx a commission of five percent of the exercise price of the Warrants for
each Warrant exercised within three (3) business days of the date the exercise
price is paid, on the terms provided for in the Warrant Agreement, only if
permitted under the rules and regulations of the NASD and only to the extent
that an investor who exercises his Warrants specifically designates, in writing,
that Xxxxxx solicited his exercise. Xxxxxx may engage sub-agents in its
solicitation efforts. The Company agrees to disclose the arrangement to pay such
solicitation fees to Xxxxxx in any prospectus used by the Company in connection
with the registration of the shares of Common Stock underlying the Warrants.
3.10. Financial Public Relations Firm. Promptly after the execution of a
definitive agreement for a Business Combination, the Company shall retain a
financial public relations firm reasonably acceptable to, but not affiliated
with, Xxxxxx for a term not less than five years, subject to earlier termination
in the event the Company is liquidated.
3.11. Reports to Xxxxxx.
3.11.1. Periodic Reports, Etc. For a period of five years following
the Effective Date or until such earlier time upon which the Company is required
to be liquidated, the Company will furnish to Xxxxxx (Attn: Xxxxx Xxxxxxx) and
its counsel copies of such financial statements and other periodic and special
reports as the Company from time to time furnishes generally to holders of any
class of its securities, and promptly furnish to Xxxxxx (i) a copy of every
press release and every news item and article with respect to the Company or its
affairs which was released by the Company; (ii) a copy of each Schedule 13D,
13G, 14D-1 or 13E-4 received or prepared by the Company; and (iii) five copies
of each Registration Statement. In addition, upon Xxxxxx'x request, the Company
shall furnish Rodman (i) a copy of monthly statements, if any, setting forth
such information regarding the Company's results of operations and financial
position (including balance sheet, profit and loss statements and data regarding
outstanding purchase orders) as is regularly prepared by management of the
Company; and (ii) such additional documents and information with respect to the
Company and the affairs of any future subsidiaries of the Company as Xxxxxx may
from time to time reasonably request; provided that Xxxxxx shall sign, if
requested by the Company, a Regulation FD compliant confidentiality agreement
which is reasonably acceptable to the Company, Xxxxxx, and their respective
counsel in connection with the Underwriter's receipt of such information.
15
3.11.2. Transfer Sheets. For a period of two years following the
Effective Date or until such earlier time upon which the Company is required to
be liquidated, the Company shall retain a transfer and warrant agent acceptable
to Xxxxxx ("Transfer Agent") and will furnish to the Underwriter at the
Company's sole cost and expense such transfer sheets of the Company's securities
as Xxxxxx may request, including the daily and monthly consolidated transfer
sheets of the Transfer Agent and DTC. The Underwriter acknowledges that American
Stock Transfer & Trust Company is an acceptable Transfer Agent.
3.11.3. Secondary Market Trading Survey. Until such time as the
Public Securities are listed or quoted, as the case may be, on the New York
Stock Exchange, the American Stock Exchange or quoted on the Nasdaq National
Market, or until such earlier time upon which the Company is required to be
liquidated, the Company shall engage Loeb & Loeb LLP, counsel to the Company
("Loeb"), to deliver and update to the Underwriter on a timely basis, but in any
event on the Effective Date and at the beginning of each fiscal quarter, a
written report detailing those states in which the Public Securities may be
traded in non-issuer transactions under the Blue Sky laws of the fifty States
("Secondary Market Trading Survey").
3.11.4. Trading Reports. During such time the Public Securities are
quoted on the NASD OTC Bulletin Board (or any successor trading market such as
the Bulletin Board Exchange) or the Pink Sheets, LLC (or similar publisher of
quotations) and no other automated quotation system, the Company shall provide
to Xxxxxx, at its expense, such reports published by the NASD or the Pink
Sheets, LLC relating to price trading of the Securities, as Xxxxxx shall
reasonably request.
3.12. Disqualification of Form S-1. For a period equal to seven years from
the date hereof, or until such earlier time upon which the Company is required
to be liquidated, the Company will not take any action or actions which may
prevent or disqualify the Company's use of Form S-1 (or other appropriate form)
for the registration of the Warrants and the Underwriter's Warrants under the
Act.
3.13. Payment of Expenses. The Company hereby agrees to pay on each of the
Closing Date and the Option Closing Date, if any, to the extent not paid at the
Closing Date, all expenses incident to the performance of the obligations of the
Company under this Agreement, including, but not limited to: (i) the
preparation, printing, filing and mailing (including the payment of postage with
respect to such mailing) of the Registration Statement, the Preliminary and
final Prospectuses and the printing and mailing of this Agreement and related
documents, including the cost of all copies thereof and any amendments thereof
or supplements thereto supplied to the Underwriter in quantities as may be
required by the Underwriter; (ii) the printing, engraving, issuance and delivery
of the Units, the shares of Common Stock and the Warrants included in the Units
and the Underwriter's Purchase Option, including any transfer or other taxes
payable thereon; (iii) the qualification of the Public Securities under state or
foreign securities or Blue Sky laws, including the costs of printing and mailing
the "Preliminary Blue Sky Memorandum," and all amendments and supplements
16
thereto, fees and disbursements for the retained for such purpose, and a
one-time fee of $5,000 payable to Loeb for the preparation of the Secondary
Market Trading Survey; (iv) filing fees, costs and expenses (including fees of
Underwriter's counsel and disbursements for the Underwriter's counsel) incurred
in registering the Offering with the NASD; (v) fees and disbursements of the
transfer and warrant agent; (vi) the Company's expenses associated with "due
diligence" meetings arranged by Xxxxxx; (vii) the preparation, binding and
delivery of transaction "bibles," in form and style reasonably satisfactory to
Xxxxxx and transaction lucite cubes or similar commemorative items in a style
and quantity as reasonably requested by Xxxxxx; and (viii) all other costs and
expenses customarily borne by an issuer incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section 3.13. The Company also agrees that it will reimburse Representative for
the cost of the investigative search firm of the Underwriter's choice that
conducted an investigation of the principals of the Company. Xxxxxx may deduct
from the net proceeds of the Offering payable to the Company on the Closing
Date, or the Option Closing Date, if any, the expenses set forth in this
Agreement to be paid by the Company to Xxxxxx and, with the prior consent of the
Company, others.
3.14. Application of Net Proceeds. The Company will apply the net proceeds
from the Offering received by it in a manner consistent with the application
described under the caption "Use Of Proceeds" in the Prospectus.
3.15. Delivery of Earnings Statements to Security Holders. The Company
will make generally available to its security holders as soon as practicable,
but not later than the first day of the fifteenth full calendar month following
the Effective Date, an earnings statement (which need not be certified by
independent public or independent certified public accountants unless required
by the Act or the Regulations, but which shall satisfy the provisions of Rule
158(a) under Section 11(a) of the Act) covering a period of at least twelve
consecutive months beginning after the Effective Date.
3.16. Notice to NASD. In the event any person or entity (regardless of any
NASD affiliation or association) is engaged to assist the Company in its search
for a merger candidate or to provide any other merger and acquisition services,
the Company will provide the following to the NASD and to Xxxxxx prior to the
consummation of the Business Combination: (i) complete details of all services
and copies of agreements governing such services; and (ii) justification as to
why the person or entity providing the merger and acquisition services should
not be considered an "underwriter and related person" with respect to the
Company's initial public offering, as such term is defined in Rule 2710 of the
NASD's Conduct Rules. The Company also agrees that proper disclosure of such
arrangement or potential arrangement will be made in the proxy statement which
the Company will file for purposes of soliciting stockholder approval for the
Business Combination.
3.17. Stabilization. Except with respect to the agreement between Xxxxxx
and ______ (the "Warrant Purchase Agreement") annexed as Exhibit 10.12 to the
Registration Statement, neither ______, the Company, nor, to its knowledge, any
of its employees, directors or stockholders (without the consent of Xxxxxx) has
taken or will take, directly or indirectly, any action designed to or that has
constituted or that might reasonably be expected to cause or result in, under
the Exchange Act, or otherwise, stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Units.
17
3.18. Internal Controls. The Company will maintain a system of internal
accounting controls sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or specific
authorization, (ii) transactions are recorded as necessary in order to permit
preparation of financial statements in accordance with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.19. Accountants. For a period of five years from the Effective Date or
until such earlier time upon which the Company is required to be liquidated, the
Company shall retain GGK, or an independent public accounting firm of national
scope or reputation.
3.20. Form 8-K. The Company shall, on the date hereof, retain its
independent public accountants to audit the financial statements of the Company
as of the Closing Date ("Audited Financial Statements") that reflect the receipt
by the Company of the proceeds of the initial public offering. As soon as the
Audited Financial Statements become available, the Company shall immediately
file a Current Report on Form 8-K with the Commission, which Report shall
contain the Company's Audited Financial Statements.
3.21. NASD. The Company shall advise the NASD if it is aware that any 5%
or greater stockholder of the Company becomes an affiliate or associated person
of an NASD member participating in the distribution of the Company's Securities.
3.22. Corporate Proceedings. All corporate proceedings and other legal
matters necessary to carry out the provisions of this Agreement and the
transactions contemplated hereby shall have been done to the reasonable
satisfaction to counsel for the Underwriter.
3.23. Investment Company. The Company shall cause the proceeds of the
Offering to be held in the Trust Fund to be invested only in "government
securities" with specific maturity dates as set forth in the Trust Agreement and
disclosed in the Prospectus. The Company will otherwise conduct its business in
a manner so that it will not become subject to the Investment Company Act.
Furthermore, once the Company consummates a Business Combination, it shall be
engaged in a business other than that of investing, reinvesting, owning, holding
or trading securities.
3.24. Business Combination Announcement. Within five business days
following the consummation by the Company of a Business Combination, the Company
shall cause an announcement ("Business Combination Announcement") to be placed,
at its cost, in The Wall Street Journal. Such announcement shall describe the
consummation of the Business Combination and indicate that Xxxxxx was the
managing underwriter in the Offering. The Company shall supply Xxxxxx with a
draft of the Business Combination Announcement and provide Xxxxxx with a
reasonable opportunity to comment thereon. The Company will not place the
Business Combination Announcement without the final approval of Xxxxxx, which
such approval will not be unreasonably withheld.
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3.25. Colorado Trust Filing. In the event the Securities are registered in
the State of Colorado, the Company will cause a Colorado Form ES to be filed
with the Commissioner of the State of Colorado no less than 10 days prior to the
distribution of the Trust Fund in connection with a Business Combination and
will do all things necessary to comply with Section 00-00-000 and Rule 51-3.4 of
the Colorado Securities Act.
4. Conditions of Underwriter's Obligations. The obligations of the Underwriter
to purchase and pay for the Units, as provided herein, shall be subject to the
continuing accuracy of the representations and warranties of the Company as of
the date hereof and as of each of the Closing Date and the Option Closing Date,
if any, to the accuracy of the statements of officers of the Company made
pursuant to the provisions hereof and to the performance by the Company of its
obligations hereunder and to the following conditions:
4.1. Regulatory Matters.
4.1.1. Effectiveness of Registration Statement. The Registration
Statement shall have become effective not later than 5:00 P.M., New York City
local time, on the date of this Agreement or such later date and time as shall
be consented to in writing by you, and, at each of the Closing Date and the
Option Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or shall be pending or contemplated by the
Commission and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
Morse, Zelnick, Rose & Lander, LLP, counsel to the Underwriter ("MZRL").
4.1.2. NASD Clearance. By the Effective Date, Xxxxxx shall have
received clearance from the NASD as to the amount of compensation allowable or
payable to the Underwriter as described in the Registration Statement.
4.1.3. No Blue Sky Stop Orders. No order suspending the sale of the
Units in any jurisdiction designated by you pursuant to Section 3.3 hereof shall
have been issued on either on the Closing Date or the Option Closing Date, and
no proceedings for that purpose shall have been instituted or shall be
contemplated.
4.2. Company Counsel Matters.
4.2.1. Effective Date Opinion of Counsel. On the Effective Date,
Xxxxxx shall have received the favorable opinion of Loeb, dated the Effective
Date, addressed to Xxxxxx and in form and substance satisfactory to MZRL to the
effect that:
(i) The Company has been duly organized and is validly
existing as a corporation and is in good standing under the laws of its state of
incorporation. The Company is duly qualified and licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations requires such qualification
or licensing, except where the failure to qualify would not have a material
adverse effect on the Company.
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(ii) All issued and outstanding securities of the Company have
been duly authorized and validly issued and are fully paid and non-assessable;
the holders thereof are not subject to personal liability by reason of being
such holders and none of such securities were issued in violation of the
preemptive rights of any stockholder of the Company arising by operation of law
or under the Certificate of Incorporation or Bylaws of the Company. The offers
and sales of the outstanding Common Stock were at all relevant times either
registered under the Act and the applicable state securities or Blue Sky Laws or
exempt from such registration. The authorized and outstanding capital stock of
the Company is as set forth in the Prospectus.
(iii) The Securities have been duly authorized and, when
issued and paid for, will be validly issued, fully paid and non-assessable; the
holders thereof are not and will not be subject to personal liability by reason
of being such holders. The Securities are not and will not be subject to the
preemptive rights of any holders of any security of the Company arising by
operation of law or under the Certificate of Incorporation, as amended, or
Bylaws of the Company. When issued, the Warrants, the Underwriter's Purchase
Option and the Underwriter's Warrants will constitute valid and binding
obligations of the Company to issue and sell, upon exercise thereof and payment
therefor, the number and type of securities of the Company called for thereby
and such Warrants, the Underwriter's Purchase Option and the Underwriter's
Warrants, when issued, in each case, are enforceable against the Company in
accordance with their respective terms, except (a) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (b) as enforceability of any indemnification or
contribution provision may be limited under the federal and state securities
laws, and (c) that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to the equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought. The
certificates representing the Securities are in due and proper form.
(iv) This Agreement, the Warrant Agreement, the Underwriter's
Purchase Option, the Services Agreement, the Trust Agreement and the Escrow
Agreement have each been duly and validly authorized and, when executed and
delivered by the Company, constitute the valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except (a) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, (b) as enforceability of any indemnification or contribution
provisions may be limited under the federal and state securities laws, and (c)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(v) The execution, delivery and performance of this Agreement,
the Warrant Agreement, the Underwriter's Purchase Option, the Escrow Agreement,
the Trust Agreement and the Services Agreement, the issuance and sale of the
Securities, the consummation of the transactions contemplated hereby and
thereby, and compliance by the Company with the terms and provisions hereof and
thereof, do not and will not, with or without the giving of notice or the lapse
of time, or both, (a) to such counsel's knowledge, conflict with, or result in a
breach of, any of the terms or provisions of, or constitute a default under, or
result in the creation or modification of any lien, security interest, charge or
20
encumbrance upon any of the properties or assets of the Company pursuant to the
terms of, any mortgage, deed of trust, note, indenture, loan, contract,
commitment or other agreement or instrument filed as an exhibit to the
Registration Statement, (b) result in any violation of the provisions of the
Certificate of Incorporation or the Bylaws of the Company, or (c) to such
counsel's knowledge, violate any statute or any judgment, order or decree, rule
or regulation applicable to the Company of any court, domestic or foreign, or of
any federal, state or other regulatory authority or other governmental body
having jurisdiction over the Company, its properties or assets.
(vi) The Registration Statement, each Preliminary Prospectus
and the Prospectus and any post-effective amendments or supplements thereto
(other than the financial statements included therein, as to which no opinion
need be rendered) each as of their respective dates complied as to form in all
material respects with the requirements of the Act and Regulations. The
Securities and each agreement filed as an exhibit to the Registration Statement
conform in all material respects to the description thereof contained in the
Registration Statement and the Prospectus. No statute or regulation required to
be described in the Prospectus is not described as required, nor are any
contracts or documents of a character required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement not so described or filed as required.
(vii) Counsel has participated in conferences with officers
and other representatives of the Company, representatives of the independent
public accountants for the Company and representatives of the Underwriter at
which the contents of the Registration Statement, the Prospectus and related
matters were discussed and although such counsel is not passing upon and does
not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and Prospectus (except as
otherwise set forth in this opinion), no facts have come to the attention of
such counsel which should lead them to believe that either the Registration
Statement or the Prospectus or any amendment or supplement thereto, as of the
date of such opinion contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
opinion with respect to the financial statements and schedules and other
financial and statistical data included in the Registration Statement or
Prospectus).
(viii) The Registration Statement is effective under the Act.
To such counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act or applicable state
securities laws.
(ix) To such counsel's knowledge, there is no action, suit or
proceeding before or by any court of governmental agency or body, domestic or
foreign, now pending, or threatened against the Company that is required to be
described in the Registration Statement.
4.2.2. Closing Date and Option Closing Date Opinion of Counsel. On
each of the Closing Date and the Option Closing Date, if any, Xxxxxx shall have
received the favorable opinion of Loeb, dated the Closing Date or the Option
Closing Date, as the case may be, addressed to Xxxxxx and in form and substance
reasonably satisfactory to MZRL, confirming as of the Closing Date and, if
applicable, the Option Closing Date, the statements made by Loeb in their
opinion delivered on the Effective Date.
21
4.2.3. Reliance. In rendering such opinion, such counsel may rely
(i) as to matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the extent such
counsel deems proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance reasonably satisfactory to
MZRL) of other counsel reasonably acceptable to MZRL, familiar with the
applicable laws, and (ii) as to matters of fact, to the extent they deem proper,
on certificates or other written statements of officers of the Company and
officers of departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company, provided
that copies of any such statements or certificates shall be delivered to the
Underwriter's counsel if requested. The opinion of counsel for the Company and
any opinion relied upon by such counsel for the Company shall include a
statement to the effect that it may be relied upon by counsel for the
Underwriter in its opinion delivered to the Underwriter.
4.3. Cold Comfort Letter. At the time this Agreement is executed, and at
each of the Closing Date and the Option Closing Date, if any, you shall have
received a letter, addressed to Xxxxxx and in form and substance satisfactory in
all respects (including the non-material nature of the changes or decreases, if
any, referred to in clause (iii) below) to you and to MZRL from GGK dated,
respectively, as of the date of this Agreement and as of the Closing Date and
the Option Closing Date, if any:
(i) Confirming that they are independent accountants with
respect to the Company within the meaning of the Act and the applicable
Regulations and that they have not, during the periods covered by the financial
statements included in the Prospectus, provided to the Company any non-audit
services, as such term is used in Section 10A(g) of the Exchange Act;
(ii) Stating that in their opinion the financial statements of
the Company included in the Registration Statement and Prospectus comply as to
form in all material respects with the applicable accounting requirements of the
Act and the published Regulations thereunder;
(iii) Stating that, on the basis of a limited review which
included a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the latest
available minutes of the stockholders and board of directors and the various
committees of the board of directors, consultations with officers and other
employees of the Company responsible for financial and accounting matters and
other specified procedures and inquiries, nothing has come to their attention
which would lead them to believe that (a) the unaudited financial statements of
the Company included in the Registration Statement do not comply as to form in
all material respects with the applicable accounting requirements of the Act and
the Regulations or are not fairly presented in conformity with generally
accepted accounting principles applied on a basis substantially consistent with
that of the audited financial statements of the Company included in the
Registration Statement, (b) at a date not later than five days prior to the
Effective Date, Closing Date or Option Closing Date, as the case may be, there
22
was any change in the capital stock or long-term debt of the Company, or any
decrease in the stockholders' equity of the Company as compared with amounts
shown in the __________, 2005 balance sheet included in the Registration
Statement, other than as set forth in or contemplated by the Registration
Statement, or, if there was any decrease, setting forth the amount of such
decrease, and (c) during the period from June __, 2005 to a specified date not
later than five days prior to the Effective Date, Closing Date or Option Closing
Date, as the case may be, there was any decrease in revenues, net earnings or
net earnings per share of Common Stock, in each case as compared with the
corresponding period in the preceding year and as compared with the
corresponding period in the preceding quarter, other than as set forth in or
contemplated by the Registration Statement, or, if there was any such decrease,
setting forth the amount of such decrease;
(iv) Setting forth, at a date not later than five days prior
to the Effective Date, the amount of liabilities of the Company (including a
break-down of commercial papers and notes payable to banks);
(v) Stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements and other
financial information pertaining to the Company set forth in the Prospectus in
each case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including work
sheets, of the Company and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter and found them to be in agreement;
(vi) Stating that they have not during the immediately
preceding five year period brought to the attention of the Company's management
any reportable condition related to internal structure, design or operation as
defined in the Statement on Auditing Standards No. 60 "Communication of Internal
Control Structure Related Matters Noted in an Audit," in the Company's internal
controls; and
(vii) Statements as to such other matters incident to the
transaction contemplated hereby as you may reasonably request.
4.4. Officers' Certificates.
4.4.1. Officers' Certificate. At each of the Closing Date and the
Option Closing Date, if any, Xxxxxx shall have received a certificate of the
Company signed by the Chairman of the Board or the President and the Secretary
or Assistant Secretary of the Company, dated the Closing Date or the Option
Closing Date, as the case may be, respectively, to the effect that the Company
has performed all covenants and complied with all conditions required by this
Agreement to be performed or complied with by the Company prior to and as of the
Closing Date, or the Option Closing Date, as the case may be, and that the
conditions set forth in Section 4.5 hereof have been satisfied as of such date
and that, as of the Closing Date and the Option Closing Date, as the case may
be, the representations and warranties of the Company set forth in Section 2
hereof are true and correct. In addition, Xxxxxx will have received such other
and further certificates of officers of the Company as Xxxxxx may reasonably
request.
23
4.4.2. Secretary's Certificate. At each of the Closing Date and the
Option Closing Date, if any, Xxxxxx shall have received a certificate of the
Company signed by the Secretary or Assistant Secretary of the Company, dated the
Closing Date or the Option Closing Date, as the case may be, respectively,
certifying (i) that the Bylaws and Certificate of Incorporation of the Company
are true and complete, have not been modified and are in full force and effect,
(ii) that the resolutions relating to the public offering contemplated by this
Agreement are in full force and effect and have not been modified, (iii) all
correspondence between the Company or its counsel and the Commission, and (iv)
as to the incumbency of the officers of the Company. The documents referred to
in such certificate shall be attached to such certificate.
4.5. No Material Changes. Prior to and on each of the Closing Date and the
Option Closing Date, if any, (i) there shall have been no material adverse
change or development involving a prospective material adverse change in the
condition or prospects or the business activities, financial or otherwise, of
the Company from the latest dates as of which such condition is set forth in the
Registration Statement and Prospectus, (ii) no action suit or proceeding, at law
or in equity, shall have been pending or threatened against the Company or any
Initial Stockholder before or by any court or federal or state commission, board
or other administrative agency wherein an unfavorable decision, ruling or
finding may materially adversely affect the business, operations, prospects or
financial condition or income of the Company, except as set forth in the
Registration Statement and Prospectus, (iii) no stop order shall have been
issued under the Act and no proceedings therefor shall have been initiated or
threatened by the Commission, and (iv) the Registration Statement and the
Prospectus and any amendments or supplements thereto shall contain all material
statements which are required to be stated therein in accordance with the Act
and the Regulations and shall conform in all material respects to the
requirements of the Act and the Regulations, and neither the Registration
Statement nor the Prospectus nor any amendment or supplement thereto shall
contain any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
4.6. Delivery of Agreements. On the Effective Date, the Company shall have
delivered to Xxxxxx executed copies of the Escrow Agreement, the Trust
Agreement, the Warrant Agreement, the Warrant Purchase Agreement, the Services
Agreement and all of the Insider Letters. On the Closing Date, the Company shall
have delivered to Xxxxxx executed copies of the Underwriter's Purchase Option.
4.7. Opinion of Counsel for the Underwriter. All proceedings taken in
connection with the authorization, issuance or sale of the Securities as herein
contemplated shall be reasonably satisfactory in form and substance to you and
to MZRL and you shall have received from such counsel a favorable opinion, dated
the Closing Date and the Option Closing Date, if any, with respect to such of
these proceedings as you may reasonably require. On or prior to the Effective
Date, the Closing Date and the Option Closing Date, as the case may be, counsel
for the Underwriter shall have been furnished such documents, certificates and
opinions as they may reasonably require for the purpose of enabling them to
review or pass upon the matters referred to in this Section 4.7, or in order to
evidence the accuracy, completeness or satisfaction of any of the
representations, warranties or conditions herein contained.
24
4.8. Secondary Market Trading Survey. On the Closing Date, Xxxxxx shall
have received the Secondary Market Trading Survey from Loeb.
5. Indemnification.
5.1. Indemnification of Underwriter.
5.1.1. General. Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless the Underwriter, and each dealer
selected by you that participates in the offer and sale of the Securities (each
a "Selected Dealer") and each of their respective directors, officers and
employees and each person, if any, who controls the Underwriter ("controlling
person") within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any and all loss, liability, claim, damage and expense
whatsoever (including but not limited to any and all legal or other expenses
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, whether arising
out of any action between the Underwriter and the Company or between the
Underwriter and any third party or otherwise) to which they or any of them may
become subject under the Act, the Exchange Act or any other statute or at common
law or otherwise or under the laws of foreign countries, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in (i) any Preliminary Prospectus, the Registration Statement or the
Prospectus (as from time to time each may be amended and supplemented); (ii) any
materials or information provided to investors by, or with the approval of, the
Company in connection with the marketing of the offering of the Securities,
including any "road show" or investor presentations made to investors by the
Company (whether in person or electronically); or (iii) any application or other
document or written communication (in this Section 5, collectively called
"application") executed by the Company or based upon written information
furnished by the Company in any jurisdiction in order to qualify the Units under
the securities laws thereof or filed with the Commission, any state securities
commission or agency, Nasdaq or any securities exchange; or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, unless such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company with respect to the Underwriter by or on behalf of the
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment or supplement thereof, or in any
application, as the case may be. The Underwriter and each Selected Dealer hereby
waives any right, interest or claim of any kind that it may have in or to any
25
monies held in the trust account for the benefit of the holders of the Public
Securities and agrees not to seek any payment of any indemnity of the Company
under this Section 5.1 from any monies held in the trust account for the benefit
of the holders of the Public Securities. With respect to any untrue statement or
omission or alleged untrue statement or omission made in the Preliminary
Prospectus, the indemnity agreement contained in this paragraph shall not inure
to the benefit of the Underwriter to the extent that any loss, liability, claim,
damage or expense of the Underwriter results from the fact that a copy of the
Prospectus was not given or sent to the person asserting any such loss,
liability, claim or damage at or prior to the written confirmation of sale of
the Securities to such person as required by the Act and the Regulations, and if
the untrue statement or omission has been corrected in the Prospectus, unless
such failure to deliver the Prospectus was a result of non-compliance by the
Company with its obligations under Section 3.4 hereof. The Company agrees
promptly to notify Xxxxxx of the commencement of any litigation or proceedings
against the Company or any of its officers, directors or controlling persons in
connection with the issue and sale of the Securities or in connection with the
Registration Statement or Prospectus.
5.1.2. Procedure. If any action is brought against the Underwriter,
a Selected Dealer or a controlling person in respect of which indemnity may be
sought against the Company pursuant to Section 5.1.1, the Underwriter or such
Selected Dealer shall promptly notify the Company in writing of the institution
of such action and the Company shall assume the defense of such action,
including the employment and fees of counsel (subject to the reasonable approval
of the Underwriter or such Selected Dealer, as the case may be) and payment of
actual expenses. The Underwriter, such Selected Dealer or controlling person
shall have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of the
Underwriter, such Selected Dealer or controlling person unless (i) the
employment of such counsel at the expense of the Company shall have been
authorized in writing by the Company in connection with the defense of such
action, or (ii) the Company shall not have employed counsel to have charge of
the defense of such action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to the Company (in
which case the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
the reasonable fees and expenses of not more than one additional firm of
attorneys selected by the Underwriter, Selected Dealer and/or controlling person
shall be borne by the Company. Notwithstanding anything to the contrary
contained herein, if the Underwriter, Selected Dealer or controlling person
shall assume the defense of such action as provided above, the Company shall
have the right to approve the terms of any settlement of such action which
approval shall not be unreasonably withheld.
5.2. Indemnification of the Company. The Underwriter agrees to indemnify
and hold harmless the Company, its directors, officers and employees and agents
who control the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act against any and all loss, liability, claim, damage and
expense described in the foregoing indemnity from the Company to the
Underwriter, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions made in any Preliminary
Prospectus, the Registration Statement or Prospectus or any amendment or
supplement thereto or in any application, in reliance upon, and in strict
conformity with, written information furnished to the Company with respect to
the Underwriter by or on behalf of the Underwriter expressly for use in such
Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any such application. In case any action
shall be brought against the Company or any other person so indemnified based on
any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or any application, and in respect of which
indemnity may be sought against the Underwriter, the Underwriter shall have the
rights and duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the Underwriter by the
provisions of Section 5.1.2.
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5.3. Contribution.
5.3.1. Contribution Rights. In order to provide for just and
equitable contribution under the Act in any case in which (i) any person
entitled to indemnification under this Section 5 makes claim for indemnification
pursuant hereto but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 5 provides for indemnification in such case, or (ii) contribution
under the Act, the Exchange Act or otherwise may be required on the part of any
such person in circumstances for which indemnification is provided under this
Section 5, then, and in each such case, the Company and the Underwriter shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
the Underwriter, as incurred, in such proportions that the Underwriter is
responsible for that portion represented by the percentage that the underwriting
discount appearing on the cover page of the Prospectus bears to the initial
offering price appearing thereon and the Company is responsible for the balance;
provided, that, no person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Notwithstanding
the provisions of this Section 5.3.1, the Underwriter shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Securities underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages that the Underwriter has otherwise
been required to pay in respect of such losses, liabilities, claims, damages and
expenses. For purposes of this Section, each director, officer and employee of
the Underwriter or the Company, as applicable, and each person, if any, who
controls the Underwriter or the Company, as applicable, within the meaning of
Section 15 of the Act shall have the same rights to contribution as the
Underwriter or the Company, as applicable.
5.3.2. Contribution Procedure. Within fifteen days after receipt by
any party to this Agreement (or its representative) of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof, but the omission to so notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit or proceeding is brought
against any party, and such party notifies a contributing party or its
representative of the commencement thereof within the aforesaid fifteen days,
the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified. Any such
contributing party shall not be liable to any party seeking contribution on
account of any settlement of any claim, action or proceeding effected by such
party seeking contribution on account of any settlement of any claim, action or
proceeding effected by such party seeking contribution without the written
consent of such contributing party. The contribution provisions contained in
this Section are intended to supersede, to the extent permitted by law, any
right to contribution under the Act, the Exchange Act or otherwise available.
The Underwriter's obligations to contribute pursuant to this Section 5.3 are
several and not joint.
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6. [Intentionally omitted]
7. Right to Appoint Observer. Until the earlier of the consummation of a
Business Combination or two years from the Effective Date, upon notice from
Xxxxxx to the Company, Xxxxxx shall have the right to send a representative (who
need not be the same individual from meeting to meeting) to observe each meeting
of the Board of Directors of the Company; provided that such representative
shall sign a Regulation FD compliant confidentiality agreement which is
reasonably acceptable to Xxxxxx and its counsel in connection with such
Underwriter's attendance at meetings of the Board of Directors; and provided
further that upon written notice to Xxxxxx, the Company may exclude Xxxxxx from
meetings where, in the written opinion of counsel for the Company, the
Underwriter's presence would destroy the attorney-client privilege. The Company
agrees to give Xxxxxx written notice of each such meeting and to provide Xxxxxx
with an agenda and minutes of the meeting no later than it gives such notice and
provides such items to the other directors and to reimburse Xxxxxx of Xxxxxx for
its reasonable out-of-pocket expenses incurred in connection with its attendance
at the meeting, including but not limited to, food, lodging and transportation.
8. Additional Covenants.
8.1. Additional Shares or Options. The Company hereby agrees that until
the Company consummates a Business Combination, it shall not issue any shares of
Common Stock or any options or other securities convertible into Common Stock,
or any shares of Preferred Stock which participate in any manner in the Trust
Fund or which vote as a class with the Common Stock on a Business Combination.
8.2. Trust Fund Waiver Acknowledgment. Prior to the commencement by the
Company of its due diligence investigation of any operating business which the
Company seeks to acquire ("Target Business") or the obtaining of the services of
any vendor, the Company shall seek to have such Target Business or vendor
acknowledges in writing, whether through a letter of intent, memorandum of
understanding or other similar document (and subsequently acknowledges the same
in any definitive document replacing any of the foregoing), that (a) it has read
the Prospectus and understands that the Company has established the Trust Fund,
initially in an amount of $______________ for the benefit of the Public
Stockholders and that the Company may disburse monies from the Trust Fund only
(i) to the Public Stockholders in the event of the conversion of their shares or
the liquidation of the Company or (ii) to the Company after it consummates a
Business Combination and (b) for and in consideration of the Company (1)
agreeing to evaluate such Target Business for purposes of consummating a
Business Combination with it or (2) agreeing to engage the services of the
vendor, as the case may be, such Target Business or vendor agrees that it does
not have any right, title, interest or claim of any kind in or to any monies in
the Trust Fund ("Claim") and waives any Claim it may have in the future as a
result of, or arising out of, any negotiations, contracts or agreements with the
Company and will not seek recourse against the Trust Fund for any reason
whatsoever.
8.3. Insider Letters. The Company shall not take any action or omit to
take any action which would cause a breach of any of the Insider Letters
executed between each Initial Stockholder, officer and director and Xxxxxx and
will not allow any amendments to, or waivers of, such Insider Letters without
the prior written consent of Xxxxxx.
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8.4. Certificate of Incorporation and Bylaws. The Company shall not take
any action or omit to take any action that would cause the Company to be in
breach or violation of its Certificate of Incorporation or Bylaws. Prior to the
consummation of a Business Combination, the Company will not amend its
Certificate of Incorporation without the prior written consent of Xxxxxx.
8.5. Blue Sky Requirements. The Company shall provide counsel to Xxxxxx
with ten copies of all proxy information and all related material filed with the
Commission in connection with a Business Combination concurrently with such
filing with the Commission. In addition, the Company shall furnish any other
state in which its initial public offering was registered, such information as
may be requested by such state.
8.6. Acquisition/Liquidation Procedure. The Company agrees: (i) that,
prior to the consummation of any Business Combination, it will submit such
transaction to the Company's stockholders for their approval ("Business
Combination Vote") even if the nature of the acquisition is such as would not
ordinarily require stockholder approval under applicable state law; and (ii)
that, in the event that the Company does not effect a Business Combination
within 18 months from the consummation of this Offering (subject to extension
for an additional six-month period, as described in the Prospectus), the Company
will be liquidated and will distribute to all holders of IPO Shares (defined
below) an aggregate sum equal to the Company's "Liquidation Value." The
Company's "Liquidation Value" shall mean the Company's book value, as determined
by the Company and approved by GGK. In no event, however, will the Company's
Liquidation Value be less than the Trust Fund, inclusive of any net interest
income thereon. Only holders of IPO Shares shall be entitled to receive
liquidating distributions and the Company shall pay no liquidating distributions
with respect to any other shares of capital stock of the Company. With respect
to the Business Combination Vote, the Company shall cause all of the Initial
Stockholders to vote the shares of Common Stock owned by them immediately prior
to this Offering in accordance with the vote of the holders of a majority of the
IPO Shares present, in person or by proxy, at a meeting of the Company's
stockholders called for such purpose. At the time the Company seeks approval of
any potential Business Combination, the Company will offer each holder of the
Company's Common Stock issued in this Offering ("IPO Shares") the right to
convert their IPO Shares at a per share price ("Conversion Price") equal to the
amount in the Trust Fund (inclusive of any interest income therein) calculated
as of two business days prior to the consummation of the proposed Business
Combination divided by the total number of IPO Shares. If holders of less than
20% in interest of the Company's IPO Shares elect to convert their IPO Shares,
the Company may, but will not be required to, proceed with such Business
Combination. If the Company elects to so proceed, it will convert shares, based
upon the Conversion Price, from those holders of IPO Shares who affirmatively
requested such conversion and who voted against the Business Combination. If
holders of 20% or more in interest of the IPO Shares, who vote against approval
of any potential Business Combination, elect to convert their IPO Shares, the
Company will not proceed with such Business Combination and will not convert
such shares.
29
8.7. Rule 419. The Company agrees that it will use its best efforts to
prevent the Company from becoming subject to Rule 419 under the Act prior to the
consummation of any Business Combination, including but not limited to using its
best efforts to prevent any of the Company's outstanding securities from being
deemed to be a "xxxxx stock" as defined in Rule 3a-51-1 under the Exchange Act
during such period.
8.8. Affiliated Transactions. Except as set forth on Schedule 8.8, the
Company shall cause each of the officers to agree that, in order to minimize
potential conflicts of interest which may arise from multiple affiliations, the
officers will present to the Company for its consideration, prior to
presentation to any other person or company, any suitable opportunity to acquire
an operating business, until the earlier of the consummation by the Company of a
Business Combination, the liquidation of the Company or until such time as the
officers cease to be an officer of the Company, subject to any pre-existing
fiduciary obligations the officers might have.
8.9. Target Net Assets. The Company agrees that the initial Target
Business that it acquires must have a fair market value equal to at least 80% of
the Company's net assets at the time of such acquisition. The fair market value
of such business must be determined by the Board of Directors of the Company
based upon standards generally accepted by the financial community, such as
actual and potential sales, earnings and cash flow and book value. If the Board
of Directors of the Company is not able to independently determine that the
target business has a fair market value of at least 80% of the Company's fair
market value at the time of such acquisition, the Company will obtain an opinion
from an unaffiliated, independent investment banking firm which is a member of
the NASD with respect to the satisfaction of such criteria. The Company is not
required to obtain an opinion from an investment banking firm as to the fair
market value if the Company's Board of Directors independently determines that
the Target Business does have sufficient fair market value.
9. Representations and Agreements to Survive Delivery. Except as the context
otherwise requires, all representations, warranties and agreements contained in
this Agreement shall be deemed to be representations, warranties and agreements
as of the Closing Date or the Option Closing Date, if any, and such
representations, warranties and agreements of the Underwriter and the Company,
including the indemnity agreements contained in Section 5 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Underwriter, the Company or any controlling person, and
shall survive termination of this Agreement or the issuance and delivery of the
Securities to the Underwriter until the earlier of the expiration of any
applicable statute of limitations and the seventh anniversary of the later of
the Closing Date or the Option Closing Date, if any, at which time the
representations, warranties and agreements shall terminate and be of no further
force and effect.
10. Effective Date of This Agreement and Termination Thereof.
10.1. Effective Date. This Agreement shall become effective on the
Effective Date at the time the Registration Statement is declared effective by
the Commission.
30
10.2. Termination. You shall have the right to terminate this Agreement at
any time prior to the Closing Date, (i) if any domestic or international event
or act or occurrence has materially disrupted, or in your opinion will in the
immediate future materially disrupt, general securities markets in the United
States; or (ii) if trading on the New York Stock Exchange, the American Stock
Exchange, the Nasdaq Stock Market or on the NASD OTC Bulletin Board (or
successor trading market) shall have been suspended, or minimum or maximum
prices for trading shall have been fixed, or maximum ranges for prices for
securities shall have been fixed, or maximum ranges for prices for securities
shall have been required on the NASD OTC Bulletin Board or by order of the
Commission or any other government authority having jurisdiction, or (iii) if
the United States shall have become involved in a new war or an increase in
major hostilities, or (iv) if a banking moratorium has been declared by a New
York State or federal authority, or (v) if a moratorium on foreign exchange
trading has been declared which materially and adversely impacts the United
States securities market, or (vi) if the Company shall have sustained a material
loss by fire, explosion, flood, accident, hurricane, earthquake, theft, sabotage
or other calamity or malicious act which, whether or not such loss shall have
been insured, will, in your opinion, make it inadvisable to proceed with the
delivery of the Units, or (vii) if any of the Company's representations,
warranties or covenants hereunder are breached, or (viii) if Xxxxxx shall have
become aware after the date hereof of such a material adverse change in the
conditions or prospects of the Company, or such adverse material change in
general market conditions, including without limitation as a result of terrorist
activities after the date hereof, as in the Underwriter's judgment would make it
impracticable to proceed with the offering, sale and/or delivery of the Units or
to enforce contracts made by the Underwriter for the sale of the Securities.
10.3. Expenses. In the event that this Agreement shall not be carried out
for any reason whatsoever, within the time specified herein or any extensions
thereof pursuant to the terms herein, the obligations of the Company to pay the
out of pocket expenses related to the transactions contemplated herein shall be
governed by Section 3.13 hereof.
10.4. Indemnification. Notwithstanding any contrary provision contained in
this Agreement, any election hereunder or any termination of this Agreement, and
whether or not this Agreement is otherwise carried out, the provisions of
Section 5 shall not be in any way affected by, such election or termination or
failure to carry out the terms of this Agreement or any part hereof.
11. Miscellaneous.
11.1. Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and shall be mailed, delivered or
telecopied and confirmed and shall be deemed given when so delivered or
telecopied and confirmed or if mailed, two days after such mailing.
If to Xxxxxx:
XXXXXX & XXXXXXX, LLC
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
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Copy to:
Morse, Zelnick, Rose & Lander, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxx, Esq.
If to the Company:
Argyle Security Acquisition Corporation
000 Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxx 00000
Attn: Xxx Xxxxxx, Co-Chief Executive Officer
Copy to:
Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx Xxxxxxxx, Esq.
11.2. Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
11.3. Amendment. This Agreement may only be amended by a written
instrument executed by each of the parties hereto.
11.4. Entire Agreement. This Agreement (together with the other agreements
and documents being delivered pursuant to or in connection with this Agreement)
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof, and supersede all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.
11.5. Binding Effect. This Agreement shall inure solely to the benefit of
and shall be binding upon Xxxxxx, the Underwriter, the Company and the
controlling persons, directors and officers referred to in Section 5 hereof, and
their respective successors, legal representatives and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provisions
herein contained.
11.6. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without giving
effect to conflict of laws. The Company hereby agrees that any action,
proceeding or claim against it arising out of, relating in any way to this
Agreement shall be brought and enforced in the courts of the State of New York
of the United States of America for the Southern District, and irrevocably
submits to such jurisdiction, which jurisdiction shall be exclusive. The Company
hereby waives any objection to such exclusive jurisdiction and that such courts
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represent an inconvenient forum. Any such process or summons to be served upon
the Company may be served by transmitting a copy thereof by registered or
certified mail, return receipt requested, postage prepaid, addressed to it at
the address set forth in Section 11.1 hereof. Such mailing shall be deemed
personal service and shall be legal and binding upon the Company in any action,
proceeding or claim. The Company agrees that the prevailing party(ies) in any
such action shall be entitled to recover from the other party(ies) all of its
reasonable attorneys' fees and expenses relating to such action or proceeding
and/or incurred in connection with the preparation therefor.
11.7. Execution in Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto.
11.8. Waiver, Etc. The failure of any of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way affect the validity of
this Agreement or any provision hereof or the right of any of the parties hereto
to thereafter enforce each and every provision of this Agreement. No waiver of
any breach, non-compliance or non-fulfillment of any of the provisions of this
Agreement shall be effective unless set forth in a written instrument executed
by the party or parties against whom or which enforcement of such waiver is
sought; and no waiver of any such breach, non-compliance or non-fulfillment
shall be construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
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If the foregoing correctly sets forth the understanding between the Underwriter
and the Company, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement between us.
Very truly yours,
ARGYLE SECURITY ACQUISITION CORPORATION
By:
------------------------------------
Name: Xxx Xxxxxx
Title: Co-Chief Executive Officer
Accepted on the date first above written.
XXXXXX & XXXXXXX, LLC
By:
------------------------------------
Name:
Title:
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